An Eco-Centric Critique of India’s DeFacto Carbon Tax Regime

Climate change has become a major global challenge for which effective legal, fiscal and regulatory frameworks are needed to mitigate greenhouse gas emissions and promote sustainable development. Carbon taxation is one of the market-based environmental instruments that has received international recognition as an effective instrument to internalise the environmental costs and promote the transition to a low-carbon economy. Countries like Sweden and Finland have shown that a well-designed carbon tax regime can drastically reduce carbon emissions without sacrificing economic growth and industrial competitiveness. India, in contrast, currently lacks a comprehensive carbon tax regime, instead adopting a piecemeal approach through measures such as coal cess, energy taxation policies, the Perform, Achieve and Trade (PAT) scheme, and the Carbon Credit Trading Scheme (CCTS). The study critically evaluates the regulatory effectiveness of the existing carbon-related fiscal and environmental framework in India and whether these fragmented mechanisms operate as a de facto regime of carbon taxation. The paper examines the legal, economic and institutional challenges to India’s carbon governance, including enforcement, corporate accountability, policy fragmentation and socio-economic inequality. Additionally, the study performs a comparative analysis of the carbon taxation models of Sweden and Finland to identify best practices and regulatory approaches for the Indian context. The study contends that genuine regulatory effectiveness requires a carbon tax architecture that is not only well-structured, transparent, and institutionally robust, but explicitly anchored in ecological carrying-capacity thresholds and the intrinsic worth of natural systems alongside India’s developmental and climate commitments.